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Tres Agaves dishwasher, Uvaldo Perrez, center, has been working hard to impress his bosses for the last month and hopes some day to be promoted to prep-chef. He makes $10 dollars and hour, just above the $9.14 minimum, and says he sends most of his earnings to support his 2-year-old daughter in Mexico. Right now he says he can't afford to be sick. Mike Kepka / The Chronicle
Uvaldo Perrez (cq) restaurant management MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/NO SALES-MAGS OUT

Photo: Mike Kepka

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Tres Agaves dishwasher, Uvaldo Perrez,...

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restaurant00291_mk.JPG Tres Agaves server, Zeta Kilbride, hurries to clear a table before moving on to the next. -
San Francisco servers hustle to make to make the dining floor operate as smooth as possible on a busy Saturday night. Servers in San Francisco make at least minimum plus tips, a rarity in the restaurant business in other parts of the country. Management said increased costs will probably force them to have less shifts to cover an average night. For instance on a Saturday if there are 8 servers shifts to cover the floor there might only be room for 7 in the future. Mike Kepka / The Chronicle Zeta Kilbride (cq) MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/NO SALES-MAGS OUT

Photo: Mike Kepka

restaurant00291_mk.JPG Tres Agaves server, Zeta Kilbride, hurries...

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Tres Agaves managing partner, Eric Rubin, estimates the new rules for restaurant employees in San Francisco will cost the restaurant an extra $200-$220 a year, reducing their profits to an even slimmer margin. Added health benefit costs and sick days will cost him an extra $2.27 per employee per hour. Mike Kepka / The Chronicle Eric Rubin (cq) the source MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/NO SALES-MAGS OUT

The first big hit to the San Francisco restaurant industry came three years ago this month -- a $1.75-an-hour increase in the minimum wage.

The second came last Monday when the city became the first in the country to require all businesses to provide paid sick leave to their employees.

The third is due in July when the city's plan to require health coverage for uninsured residents kicks in -- assuming the employer mandate portion of the ordinance survives a legal challenge by restaurant owners.

A word to diners: Budget accordingly.

"We think it will cost us $180,000 to $200,000 a year for just those three increases," said Dave Stanton, managing partner of Tres Agaves, the Mexican restaurant near AT&T Park that opened to rave reviews in October. "I'm going to have to raise prices for all my drinks and appetizers a dollar and entrees two dollars. I don't know how else to do it."

His is a common refrain among restaurateurs in a city synonymous with fine dining, where tourism rules the economy. The three new mandates, they say, will have the unintended consequences of reducing workers' hours and blemishing the city's reputation for hospitality.

"What eventually will happen is, we will lag behind," said Joseph Manzare, a partner in Tres Agaves and the chef and owner of three other San Francisco restaurants, Globe, Zuppa and Pescheria.

"We are known as the best restaurant city in the world, but we are going to start lagging because there will be a lack of service, a lack of staff in the dining hall. Something has to give," Manzare said.

San Francisco SupervisorTom Ammiano, a supporter of the three measures, thinks restaurateurs protest too much. He noted that a Field Poll in January found that 78 percent of voters supported requiring employers to provide insurance for employees. And 76 percent supported expanding government programs to cover uninsured people, Ammiano noted.

"You get a more loyal workforce when you provide insurance, you get a healthier workforce," Ammiano said.

"You cannot exploit workers as was done in the past. But remember, restaurants are in this for profit. This is not a Peace Corps exercise for them."

The supervisor added that he was asked to leave a Valencia Street restaurant recently by an owner protesting his support of the San Francisco health care ordinance.

All three mandates are for worthy causes, a half dozen restaurant owners interviewed acknowledged. But they maintained that the cumulative burden is unfair, particularly on small, labor-intensive neighborhood businesses that are critical to the city's economic engine.

"They may call themselves progressive," Mark Pastore, the owner of Incanto Restaurant on Church Street, said of the San Francisco Board of Supervisors. "But their actions are paving a path for only large, ruthless, profit-driven corporations to survive in San Francisco. Is this the San Francisco we want to build?"

When the city's minimum wage law became effective in February 2004, Pastore imposed a special charge, explaining it on the menu and customers' bills, "A partial service charge of 5 percent will be added to each check, enabling us to share the rewards of serving you with our non-tipped kitchen employees."

The boost in the minimum wage went to Incanto's waiters, who were paid the minimum but benefited, some very handsomely, from tips. The increase did not go to members of the kitchen staff, who were already making a few dollars above minimum wage.

Pastore uses the service charge to pay 100 percent of health care coverage for a dozen kitchen workers. He expects the city health care program that starts in July will add an additional $75,000 to $80,000 to his costs. That about equals his 2005 profit of $80,000.

Incanto's owner said the restaurant's customers find the service charge more palatable than higher prices because it gives them permission to deduct it from the tip.

"I think raising prices up to the sky over time does not benefit diners or benefit my business, and it won't benefit my employees," Pastore said. "We are like a lobster in a pot of water. The real risk in San Francisco right now is the temperature simply keeps going up every year."

Gayle Pirie, the chef and co-owner of Foreign Cinema, a moderately priced Mediterranean bistro on Mission Street, also is staring at potential additional annual costs of more than $200,000.

She and partner John Clark like to give year-end bonuses to the kitchen staff. Now those are threatened.

"With these mandatory benefits, we have less control over giving benefits to our employees," Pirie said. "You are forced to restrain your generosity in ways that are not your style."

Tres Agaves is a partnership between Manzare, the chef, Sammy Hagar, the rocker who heads Cabo Wabo Enterprises, and Julio Bermejo, owner of Tommy's Mexican Restaurant on Geary Boulevard. Its 38 investors put more than $2 million into the 10,000 square-foot place. The partnership is considering another location -- but it won't be in the city.

"I can tell you that as of right now, we are not looking to expand in San Francisco," said Eric Rubin, a managing partner. He called the city's business environment "onerous."

The restaurant has a staff of 75. "It's a labor-intensive industry, and the last thing we need is to get dinged for it," Rubin said.

One option the partners are considering is to set food and drink prices that aren't round figures -- say, $22.57 for a steak. That might prompt guests to ask why and give the restaurant an opportunity to talk about San Francisco's perceived impositions on small businesses.

"We want to create a groundswell of public opinion. We want it to resonate with the public that we are having to pass these charges along to them," Rubin said.

"Where we are headed for, you are not going to see those cool, little local restaurants. You are going to see a bunch of corporate restaurants, and the rest of the city is going to look like the restaurant dynamic on Fisherman's Wharf," Rubin said.

Many restaurateurs are hoping the suit filed by the 800-member Golden Gate Restaurant Association in federal court last year will give them relief. The suit seeks to invalidate the mandate that businesses with 20 or more employees pay for their health coverage, arguing that municipalities don't have the power to impose such requirements.

Association Executive Director Kevin Westlye, the former owner of the Franciscan on Fisherman's Wharf, said guests often react to menu price increases by buying down. When wild salmon moves from $22 to $25 they'll order filet of sole at $18 instead.

"The effects of these increases will be that ... people who might dine out three nights a week will dine out two nights," he said. "The best restaurants will continue to attract customers. It won't affect the top tier, but it will affect the next tier down. It will make the difference between profitability and lack of profitability."

"With education and cooperation most of this can be smoothed out," he said "But these things should have been taken care of in the past."

San Francisco's employer mandates

Minimum wage: Voters approved a $1.75-an-hour raise to $8.50 an hour effective Feb. 23, 2004. This year, the hourly minimum is $9.14 adjusted for inflation, the second-highest in the nation.

Paid sick leave: In November, voters approved a requirement that businesses provide paid sick leave to full-time, part-time and temporary employees who work in the city. Employees accrue one hour of paid sick leave for every 30 hours they work.

Health access: The Board of Supervisors last July unanimously approved a requirement that large and midsize employers who don't provide health insurance contribute a minimum of $1.11 to $1.68 per hour per employee to a city health coverage fund.